What is an airline credit really worth?

It happened to Louise Andrew twice last month. She made reservations on the United Airlines Web site, tried to cancel them within 24 hours for a full refund, and was told that the airline would be happy to issue a ticket credit instead.

“Both times, I was initially told that my purchase value would be applied to a future ticket,” says Andrew, an attorney from Redmond, Wash.

That didn’t make sense to her. United promises a no-questions-asked refund on most tickets as long as the request is made within a day of the reservation. And since 2011, the Department of Transportation has required airline reservations to be cancellable without penalty for at least 24 hours after the booking is made, unless the ticket is purchased one week or less before a flight’s departure date.
Andrew’s case illuminates the growing problem of ticket credit deflation. Historically, airlines have preferred to issue credit instead of a cash refund. They’re also fairly generous when it comes to parceling out vouchers for future flights. The reason? Redemption rates on vouchers hover somewhere between 5 and 8 percent, so there’s little cost to the company.

But lately, many airlines have made their credit even more difficult to turn into a usable ticket through a combination of aggressive new policies, fees and restrictions. The net effect could be that your next ticket credit might not be as valuable as you think.

In fact, it may be worth nothing.

Andrew experienced one of the most effective ways airlines can lay claim to all your money. They push you into taking a credit instead of a refund but then make it difficult to redeem the credit. Had Andrew agreed to the credit, United might have imposed additional terms on the funny money that could have rendered it useless.

This spring, United was the first carrier to raise its domestic ticket change fee from $150 to $200 — a move that all the other major airlines, except Southwest, soon followed. High change fees make ticket credits worthless on some discounted fares, since the fees often exceed the value of the ticket.

Other restrictions apply. In late 2011, Delta Air Lines tightened its voucher rules, making vouchers non-transferable and disallowing their redemption in conjunction with other credit. On Spirit Airlines, travel credit requests must be booked within two months of issuance, instead of the industry average of one year, according to the airline’s contract of carriage. When air travelers miss that deadline, their credits are quietly zeroed out, and appeals to reinstate them are met with rejection form letters.

Andrew didn’t accept United’s initial offer, because she knew about the Transportation Department’s 24-hour rule. “I had to repeatedly badger them to get my refunds,” she says. Even so, it took the airline six weeks to refund the cost of her first ticket, she says. An airline representative told her that the second refund could take up to two months.

Charles Hobart, a representative for United, said that shouldn’t have happened. “We offer a full refund back to the original form of payment in the first 24 hours of booking a new ticket through United.com or through a contact center representative,” he says.

Andrew is hardly the only United passenger who feels frustrated by the foot-dragging. A recent on-site inspection by DOT investigators at the airline’s headquarters found that between March and May 2012, the airline had failed to process more than 9,000 refund requests in a timely manner. In August, the government fined United $350,000 for its sluggish refunds.

The government can’t always help. Although a DOT spokesman says that federal law requires airlines to be “truthful and transparent” with their ticket credits, the agency doesn’t directly regulate the terms or conditions of flight vouchers.

“The law prohibiting unfair or deceptive practices in air transportation requires airlines to ensure that the information they provide about vouchers is accurate, and that they disclose restrictions placed on vouchers when they are offered as an alternative to a payment the consumer is entitled to, such as a settlement of a baggage claim or a ticket refund,” says agency spokesman Bill Mosley.

Yet consumers are sometimes confused. Susan Vick, a college professor from Baltimore, received an $800 voucher from US Airways after a flight delay from Rome to Philadelphia. “What should I watch out for when I want to redeem it?” she asked.

A look at the restrictions on her voucher suggests the answer: What should you not look for? Her airline scrip can’t be used on the Internet, doesn’t allow any stopovers, can’t be combined with any other voucher, and can’t be used to pay for a reservation that she has already made. If she finds a ticket for more than $800, she’ll have to pay the difference in cash, but if the flight costs less than $800, the airline keeps the balance, according to the terms.

It’s hard to blame the airline industry for adopting these policies. Consumers crave cheap fares and have the tools to find them, thanks to the Internet. Since passengers seem remarkably tolerant of junk fees and absurd restrictions — and since they’re perfectly legal — why shouldn’t the industry look there to boost its bottom line?

You don’t have to get stuck with useless credit. Next time an airline agent offers you a voucher, ask for cash instead. If you can’t get it, break out your reading glasses and review the fine print before saying “yes” to anything else.